Profit Sharing: The Secret to Successful Property Manager Retention

If you’ve struggled to retain staff in your property management department, you might be looking for new ways to retain top talent. For agency principals, one innovative strategy to keep your key players engaged and motivated is through a profit share arrangement. Such a plan not only fosters loyalty but can also serve as a robust succession planning tool for when you’re ready to exit your business. After being asked about this strategy so many times in the last few months, I wanted to create a detailed guide on how to set up a profit share arrangement with your property manager that could lead to increased retention and mutual success.

Step 1: Recruit with Retention in Mind

The foundation of a successful profit-sharing plan is the quality of your recruits. It's crucial to onboard property managers who not only excel in their roles but are also aligned with your agency's long-term vision. This foresight ensures that you invest in professionals you trust and are happy to share your profits with as they grow within your business.

Step 2: Establish Criteria for Profit Sharing Eligibility

Typically, the eligibility for entering into a profit share agreement should begin when a property manager reaches a senior level, demonstrating they can manage responsibilities independently. This progression marks their readiness to share in the financial successes of the business, incentivising them to further align their efforts with the your agency’s goals.

Step 3: Draft a Clear Profit Share Agreement

A profit share agreement is not just a handshake deal though. It requires a carefully drafted legal document outlining the specifics of the arrangement. This agreement should detail the percentage of profits shared and the incremental increase over time. For instance, a common structure is to offer 1% of the total profits per year, culminating in up to 10% after a decade. As O*NO Legal explains: “whether you receive profits as dividends or as distributions will depend on the type of structure. Honestly, the distinction doesn’t really matter – what matters is that you agree how and when this will happen” 

Step 4: Implement Milestones for Role Advancement

At the five-year mark, consider promoting your property manager to an associate director. This promotion acknowledges their contribution but also gives them a seat at the decision-making table. Such an inclusion can be incredibly motivating, giving them a tangible stake in the direction of the agency.

Step 5: Provide an Option for Business Ownership

After ten years, offering the option to buy a percentage of the business can be the pinnacle of your profit-sharing plan. This opportunity for ownership is the ultimate incentive for a property manager to remain with your company and strive for its continued success.

Step 6: Communicate and Review Regularly

Effective communication is key to maintaining a healthy profit-sharing arrangement. Regular meetings to discuss the progress of the agreement and any adjustments needed based on business performance or market changes are crucial. This transparency ensures that both parties remain committed and aware of their contributions and benefits.

One more thing

It’s imperative to consult with a legal professional to tailor your profit-sharing plan to the unique needs of your agency. A lawyer can provide invaluable advice on the intricacies of profit sharing and help you navigate potential pitfalls. For more help, engage with a lawyer who has experience in writing profit sharing agreements.

Setting up a profit share arrangement with your property manager can significantly improve  property management retention and commitment. By strategically sharing profits, you not only reward high performance but also align your team’s aspirations with the growth and success of your agency. Remember, the key to a successful profit-sharing plan lies in its execution. Recruit wisely, draft carefully, and communicate openly. With these steps, you're not just investing in your business's present but securing its future leadership and success.

Want to talk more about implementing a profit-share agreement with your team? Book a call with me to discuss my mentoring.